Better Medicine

Fixing the left’s health care prescription.

When Bill Clinton ran for president in 1992, James Carville famously taped up a three-point agenda in the war room. Everyone knows the first two points; the third was, "Don't forget health care." Two years later, lots of Democrats were wishing they had. For years after the defeat of the audacious Clinton health plan, major reform was a nonstarter, and reformers stuck to small-scale initiatives to patch up the most glaring gaps in coverage.

This may be about to change—especially if Democrats take one or both houses of Congress this fall. Although health care hasn't featured prominently in the current campaign, polls show it's one of the public's top three or four voting priorities. This isn't surprising, considering that health premiums have doubled since 2000 and the ranks of the uninsured reached a record 46.6 million in 2004. What's noteworthy is that Democrats are daring to be ambitious once more. Eschewing piecemeal solutions, they're increasingly insisting on full-bore national health insurance—what many now term "Medicare for All." Paul Krugman has written a steady stream of pieces calling for a single public insurer like Medicare. Liberal stalwarts Sen. Ted Kennedy and Rep. John Dingell—who've each proposed various complicated compromise plans in the past—have teamed up to introduce the Medicare for All Act, which would, in Kennedy's words, "expand Medicare over the next decade to cover every citizen—from birth to the end of life." Meanwhile, Rep. John Conyers Jr. has attracted 77 co-sponsors for his bill (also bearing the Medicare for All label) to cover all Americans through a single national plan, and liberal advocacy group MoveOn.org has recently made "health care for all" its leading issue. When it comes to health care, the left is back.

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Alas, the left is also biting off too much. Advocates of Medicare for All are right to call for a bold plan based on a time-tested and popular program, rather than the complicated, often unworkable 72-point plans that have dominated recent Democratic discussions. But they're wrong to assume that the barriers that have stymied national health insurance so many times before can be swept aside merely by talking about how sensible Medicare for All is. Democrats shouldn't forget health care, but they shouldn't forget the lessons of history, either—and at the moment, they seem to be.

Admittedly, I've been arguing for some time that Medicare should be the platform for expanded coverage. The case for this approach is straightforward: Medicare is highly popular. It's familiar and easy to explain. It provides good coverage that pools risks broadly. And it spends less for medical services than the private sector does.

What Medicare for All enthusiasts are calling for, however, isn't just an expansion of the program. Instead, they want Medicare to become the exclusive source of insurance for virtually all Americans. In other words, they want a "single payer," to resurrect the left's Clinton-era term of choice. Indeed, for some who now use the Medicare for All label, Medicare isn't really the model at all. The Conyers bill, for instance, would essentially eliminate private insurance and abolish for-profit medicine. (Medicare, by contrast, contracts with private plans to provide coverage to some seniors and pays all providers accepting its fees and rules, regardless of whether they're nonprofit.) Revealingly, aside from the bill's title, the only mentions of Medicare in the legislation concern the redeployment of Medicare's funds and the elimination of its regional offices.

There's much to be said for a single-payer system. Countries that have taken this route spend much less to provide secure insurance to everyone than the United States does to provide incomplete and insecure coverage to less than 85 percent of the population. Yet these advantages—guaranteed coverage and effective cost control—could be achieved without going all the way to a single national program, with all the public skepticism and political opposition that such a program would surely engender. Yes, Americans like Medicare, and yes, Medicare is easy to explain. But that doesn't mean most people are ready to say everyone should be covered by Medicare. Many of us remain stubbornly attached to employment-based health insurance, and proposing to abolish it entirely is likely to stir up fear as well as gratitude.

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The biggest problem with American health financing is not that employers sponsor coverage. It's that employers decide whether workers get coverage at all. So, why not give employers the option of providing low-cost coverage to their workers through a new public program modeled after Medicare? If employers want to provide comparable private coverage, they can. But if they don't provide basic insurance, their workers should be automatically enrolled in the new Medicare-like program.

A few years ago, I developed a proposal along these broad lines, and it has been extensively analyzed by the Lewin Group, the leading private firm that does cost and coverage estimates for groups developing reform plans. The Lewin Group's estimates show that if employers were allowed to purchase public coverage for their workers by paying a modest wage-related premium, roughly half of Americans younger than 65 would be in the new Medicare-like plan and the other half would remain in private insurance. Small and low-wage firms would generally see benefit in signing up for public coverage. Large and high-wage firms would be more likely to continue to provide coverage on their own. All Americans with direct or family ties to the work force would be guaranteed affordable coverage, at a cost of just under $110 per person in increased health spending. (The unemployed would be signed up through state unemployment offices or through outreach efforts run by hospitals and public-assistance programs.)

The new federal costs are not trivial, but they are much, much less than those of any Medicare for All plan I've seen. Creating a single payer means, in effect, shifting the financing of care from the hidden costs that insured workers pay (in the form of lower wages) to the highly visible tax burden that would be needed to fund most of the nation's health financing through the public sector. Because my proposal keeps a large share of employers in the game, and requires a modest contribution from the rest of them, its new federal costs would be relatively modest. Moreover, employers that now provide coverage would, on average, receive substantial savings, because some would sign up for low-cost public coverage and because they would spend less to subsidize the uninsured and finance coverage for workers' employed spouses.

Labor unions are increasingly attracted to a public-private partnership of this sort. Business groups are another matter, but the idea that they might warm to it isn't so far-fetched. After all, this proposal lets employers continue to provide coverage if they want to, preserves a substantial role for private insurance, and saves many companies serious money. At the same time, it ensures that all workers have good, affordable coverage in the public or private sector. That's the kind of bargain that could give compromise a good name—if the left would pursue it.